By Peter Edgar, Chief Financial Officer at Huboo
It’s fair to say 2022 has not been an easy year for online retailers. Consumer confidence has been knocked by a seemingly unending barrage of troubling events – from the war in Ukraine to the political turmoil closer to home. These have combined to push inflation into double figures, drive up energy prices and send the value of the pound spiralling. Year on year, we’ve seen around 66% more expensive to run a business, and since the start of 2022, overall eCommerce sales have dropped by 40%.
But the horizon is not all doom and gloom. If we zoom out to also consider pre-pandemic online sales, it’s clear that the general upward sales trajectory is still continuing today, even if wider macroeconomic forces have prevented the industry from sustaining the heady heights it reached in 2020/21.
Growth opportunities are available to the retailers who can run a tight ship, operate with agility and use all of their marketing nous to appeal to cash-strapped consumers. Here are a few tips on how they can continue to perform strongly even as the market conditions worsen.
Make products more accessible to more people
Adding additional online marketplaces and sales channels to the sales mix allows online retailers to make their product lines available to a wider range of prospective customers. It isn’t just about getting on Amazon anymore. From global channels to bespoke local sites, retailers are spoilt for choice when it comes to the range of marketplaces.
Getting set up on a new marketplace takes no time at all these days, thanks in part to a host of new eCommerce tools that remove the friction and complexity from the process such as Linnworks and Selro. And once the retailer is up-and-running on multiple marketplaces, they can simplify the day-to-day management of these sales channels by using dedicated eCommerce management software.
Retailers should take the time to look for affordable tools that promise the ability to integrate both multi-channel management and fulfilment within a single user interface, meaning that all products will be picked, packed and posted accurately and consistency, regardless of where the sale takes place, with stock levels updated automatically across each marketplace.
Develop a broader online presence
Around 40% of independent businesses don’t have their own website. It might sound like a bit of a hassle, particularly to the less tech savvy amongst us, but there is a serious upside to having a branded site, rather than relying purely on marketplace exposure.
A dedicated online store helps increase a retailer’s visibility, making a company more discoverable online to both new and existing customers. Along with social channels, websites tend to be the first place consumers go to find out more about a company. It’s a great way for companies to build their brand, attract new customers and increase the likelihood of return custom.
Selling directly from their own website can also increase a retailer’s profit margins. While businesses will need to pay a company like Shopify to process their payments, this is minimal when compared to almost all marketplaces’ selling fees.
It’s perhaps no surprise then that we are now seeing a growing number of retailers using promotions or QR codes to tempt customers off the major marketplaces and encourage them to buy direct from the company’s own website.
Check that pricing remains competitive
At times of high inflation and market volatility, the competitive landscape can change very quickly, so online retailers need to pay close attention to ensure they are not pricing themselves out of potential custom.
The first step is to benchmark their products by looking at comparable items on key marketplaces. Remember that value can fluctuate, meaning that a price that seemed fair and reasonable to consumers 12, or even 6 months ago may be seen very differently now.
The next step is to decide on a pricing strategy that is both competitive for customers and sustainable for the business. For example, dropping prices when the cost of running a business is rising may seem counterintuitive, but with the right marketing – i.e. focused on increasing volume and encouraging repeat business – it can often be a better strategy than passing on these costs to consumers.
Outsource the fulfilment burden
The storing, picking, packing and delivery of products is a considerable time commitment for online retailers of all shapes or sizes, which is why they need a fulfilment provider they can trust to get on with the job, leaving them free to focus on ramping up sales.
By outsourcing fulfilment, retailers can also reduce overheads by only paying for the warehouse space they need, when they need it. The best fulfilment providers will be flexible enough to allow retailers to expand or contract their warehouse space to match customer demand. This takes the financial edge off any sales troughs, while also enabling retailers to fully capitalise on the peaks – for example, by quickly ramping up production/supply, safe in the knowledge that there’s extra space available to accommodate the goods.
Prepare for the seasonal rush
With Christmas round the corner, retailers must act now to ensure products are in the right place at the right time. For pan-European businesses, this means getting stock into market and ready to go ahead of the seasonal rush. And for UK-focused businesses, companies may consider placing products in strategic regional locations, if same day delivery is required.
Acting now helps retailers avoid the risk of not having products readily available to meet demand, which would leave them unable to maximise sales, and in risk of being left with excess stock they can’t shift.
For businesses struggling to afford the stock needed to capitalise on demand, one option is inventory loans. These – offered by an array of small business finance companies like Uncapped – enable businesses to take out short-term loans against their stock and pay them back only as and when they sell their products. This helps businesses to increase inventory ahead of shopping peaks, while smoothing out cashflow.
Think positive, but be responsive
Online retailers have shown immense resilience and agility over recent years, overcoming the challenges of Covid and Brexit, amid a general climate of consumer and business uncertainty.
To ride out the challenging months ahead, retailers need to pay close attention to the shifting business landscape – following sales trends, tracking the market and adapting their operations accordingly. Retailers who stay alert and agile will find opportunities to strengthen their business and to gain a competitive advantage.